warning!!! ......gfc2 could be upon us, page-41

  1. 14,931 Posts.
    If I may just clear up a few misconceptions about debt, and the differences between public and private debt.

    Firstly, clear distinctions exist between good debt and bad debt. Good debt is where the person who takes on debt has a distinct business plan that is put into action which has a clear well planned out objective to create a profit. On the other hand bad debt is just someone who follows the crowd and gets a loan (because everyone else says its a great idea) to purchase an over priced lemon of a deal that has no clear objective and is doomed to failure from day one.
    Good debt creates wealth, bad debt destroys it.

    Secondly,
    It is wrong to automatically assume that debt in itself caused GFC1.
    GFC1 did not originate because of good debt, but rather bad debt wrapped up into dishonestly drafted derivatives that were fed to investors that did not understand the true nature of those instruments.

    In relation to public and private debt, Private debt has the potential to be far more profitable than public debt, because of the very nature of that debt which is designed to make a profit whereas Public debt on the other hand is not directly designed to create wealth, but rather concerns itself with public expenditure projects ie infrastructure, the public services, education, health etc etc
    This is why Public debt has a greater potential to cause problems if not competently controlled....and history has shown us that politicians cannot be trusted to make the right decisions. I hope you can now see why public debt is so dangerous and why the worlds financial systems are so worried.
 
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